Banking News

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Savers suffer as savings account providers cut rates

27 November 2008 / by Rachael Stiles

Savers are being 'left out in the cold' and it is now more important than ever for them to make sure they're getting a competitive return on their savings as banks and building societies cut their rates in line with the base rate, according to Moneyfacts.co.uk.

Almost a quarter of variable rate savings products have already had their rates slashed after the Bank of England cut the base rate by 1.5 per cent this month, with most of them passing on the full cut or more to their savers.

If the remaining providers also pass on the rate cut in full then this could lead to 12 per cent of the savings account market paying no interest at all, 27 per cent paying less than one per cent, and 52 per cent paying two per cent or less.

"With mortgage lenders not passing the cut on in full, savers were hoping that they would get off lightly, but so far their optimism has been misplaced." said Michelle Slade, analyst at Moneyfacts.co.uk.

"At the start of the month, there was an abundance of accounts paying well over 6%. These are now disappearing fast and will no doubt be gone by early next week as more cuts are announced."

It is now "more important than ever" for savers to review the returns they are getting on their investment and compare savings accounts to see if they could get more, she said, or "they could be left seriously out of pocket."

But there is still hope for savvy savers, Ms Slade continued, because as banks remain wary about lending to each other and consumers, they will continue to concentrate on building up their savings deposits and will not want to "drive their savers into the arms of their competitors, so hopefully we may see other providers restricting the cuts they make." she concluded.